GANG OF SIX AND CHAINED CPI
(House of Representatives - July 20, 2011)

Formatting necessary for an accurate reading of this text may be shown by tags (e.g., <DELETED> or <BOLD>) or may be missing from this TXT display. For complete and accurate display of this text, see the PDF.

[Pages H5245-H5246]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
GANG OF SIX AND CHAINED CPI
The SPEAKER pro tempore. The Chair recognizes the gentleman from
Oregon (Mr. DeFazio) for 5 minutes.
Mr. DeFAZIO. Well, yesterday the so-called ``Gang of Six'' on the
Senate side--six very important Senators--unveiled sort of an outline
about how to save $4 trillion over the next 10 years. Immediately it
was embraced by President Obama. We really don't know much about it,
nor does he, but he immediately embraced it.
We know one thing about it. It contains something called a chained
CPI. Okay. Well, who cares about a chained CPI? Well, seniors, they
care a lot about a chained CPI; middle-income taxpayers, they care
about it--they don't know it yet; veterans, and a whole host of other
people.
What is a chained CPI? Well, the pointy heads, like Mr. Furman who
work for President Obama, say we're understating and overstating
inflation with the way we adjust. There is something called
substitution effect. So when prices of things go up, you buy something
cheaper, so that means
[[Page H5246]]
there isn't inflation. Well, no, wait a minute; the thing you used to
buy is still more expensive and you're buying something else? But in
the pointy-head economics world, this makes sense.
So let's say how this would work for someone on Medicare: Okay, you
can't afford your heart bypass, so instead you'll say to the doc,
``Hey, look, I can't afford the copay on the heart bypass. Why don't
you do a hernia instead?'' That's substitution. In Mr. Furman's world,
this makes sense.
Now what this would do to seniors on Social Security, we already
understate inflation. Seniors haven't gotten a COLA for the last 2
years. Tell me the price of prescription drugs and medical care hasn't
gone up over the last 2 years. We need, in fact, a different measure
for seniors, for Medicare, for our veterans and others who consume more
health care and more essentials, which the CPI doesn't measure. It just
measures junk that people buy. That's all it measures. And they're
saying because people buy cheaper junk, we should change the CPI. That
means the senior, by the time they reach 85 in this brave new world of
the chained CPI, will get 100 bucks less a month in their Social
Security--not too good. Veterans would see their benefits also be
restrained and go down about the same amount.
And then there is this other little impact they're not mentioning. If
you're earning $20,000 a year, the tax brackets get adjusted every
year. Well, they wouldn't get adjusted so much anymore under the
chained CPI. So someone who earns $20,000 a year over 10 years would
see their taxes go up 14 percent, but for the rich people, you earn
$500,000 a year, you're already at the top; their taxes will only go up
.3 percent, three-tenths of 1 percent. Fourteen percent for someone who
earns $20,000 a year; .3 percent for someone who earns $500,000. And
Obama has embraced this?
What's happened down there at the White House? They're listening to
these pointy-head economists, and they're going after programs that are
important to the American people. All of this, all combined of this
great ``Gang of Six,'' would save $4 trillion over 10 years. That is,
seniors will pay more, working people will pay more, veterans will pay
more--rich people, not so much--but it would save $4 trillion. Guess
what? If we let all the Bush tax cuts expire at the end of next year--
all of them, and the stupid Social Security tax holiday--that would be
$5 trillion over 10 years and we wouldn't have cut Social Security, we
wouldn't have cut veterans benefits, we wouldn't have asked low-income
and middle-income people to pay more in taxes. Now does that make more
sense? I think so.
Let's hope they rethink this down at the White House, and I hope the
American people are watching closely.
____________________